Ella Company
Last Year, Ella Company Produced 10,000 Units and Sold

question 2

Multiple Choice

Ella Company
Last year, Ella Company produced 10,000 units and sold 9,000 units at a sales price of $9 per unit. Costs for last year were as follows: $$\begin{array} { |l | r | } \hline\text { Direct materials } & \$ 10,000 \\\hline \text { Direct labour } & 15,000 \\\hline \text { Variable manufacturing overhead } & 5,000 \\\hline \text { Fixed manufacturing overhead } & 20,000 \\\hline \text { Variable selling expense } & 7,200 \\\hline \text { Fixed selling expense } & 5,000 \\\hline \text { Fixed administrative expense } & 12,000 \\\hline\end{array}$$ Fixed manufacturing overhead is applied on the basis of expected production. Last year, the company expected to produce 10,000 units.The company had no beginning inventories.
-Refer to Ella Company. What is the operating income for using the absorption costing method?

• A) $11,300
• B) $11,800
• C) $12,520
• D) $36,000

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Definitions:

Licensing Rights

Licensing rights refer to permissions granted by the owner of intellectual property (such as trademarks, patents, copyrights) to another party, allowing them to produce, sell, or use the property in specified ways.

Apparel Deal

An agreement or contract concerning the design, production, and/or distribution of clothing and accessories.

Rebranding

The process of changing a company's image, mission, or identity through a redesigned strategy, logo, and marketing materials to create a new perception.

Product Mix Breadth

The variety of different product lines that a company offers to its customers.